Author: Dong Jing Source: Wall Street News

Retail investors, once the most reliable fuel for the crypto market, are retreating en masse.

On March 2, according to Bloomberg, the latest report released by market maker Wintermute, citing JPMorgan Chase data, said that since the end of 2024, retail funds have continued to shift to the stock market, a trend that accelerated significantly after the crypto market crash in October last year. Bitcoin has nearly halved from its all-time high of around $126,000 and is currently trading around $66,000, while stock indexes continue to move higher.

This structural shift directly shakes the foundation of demand in the crypto market. Unlike the stock market, which is supported by corporate profits, dividends and institutional allocation needs, crypto assets have long been highly dependent on the speculative enthusiasm of retail investors as the main demand driver. Wintermute CEO Evgeny Gaevoy said that cryptocurrencies have now been reduced to “one of many risk assets with similar volatility characteristics” and no longer enjoy a unique status.

Fund flow data confirms transfer trend

Fund flow data clearly illustrates the scale of this migration. Spot Bitcoin ETFs have suffered nearly $3 billion in net outflows over the past three months, according to data compiled by Bloomberg, although there have been minor reversals in some recent sessions.

It is worth noting that the crypto market crash last October was the direct trigger of this great migration of retail investors. According to Coinglass data, the crash liquidated more than 1.6 million traders and wiped out more than $19 billion in positions, with more than $7 billion disappearing in less than an hour.

The Wintermute report pointed out that after the crash, there was an "almost complete shift of retail funds to the stock market" and this trend continues today.

This marks a clear break from previous investment cycles - in which stocks and digital assets tended to move in tandem as a double bet on risk appetite, with retail investors having no clear choice between the two markets.

At the same time, stock funds continue to attract gold, and theme ETFs are also popular - taking gold-themed ETFs as an example, they attracted more than US$20 billion in funds during the same period. Cosmo Jiang, portfolio manager at Pantera Capital, noted that retail speculative attention is spreading to broader thematic trading.

"From the monthly ETF data, we can see that gold, silver, quantum computing and other theme ETF funds have poured in, while Bitcoin and Ethereum ETFs have experienced fund outflows during the same period," he said. "This directly shows that a considerable amount of speculative retail investor attention and momentum has been rotated to other theme transactions."

The volatility advantage narrows and the attractiveness of encryption decreases

One of the core appeals of cryptocurrencies for retail investors is their high volatility compared to traditional assets—an advantage that is fading.

According to Wintermute data, Bitcoin’s realized volatility ratio relative to Nasdaq continues to decline, falling below 2x in the first half of 2025. For ordinary traders chasing excess returns, the volatility gap between crypto and equities is narrowing, diminishing the unique appeal of crypto assets.

Wintermute summarized this phenomenon in its social media post as: "The surge in retail investor activity in the stock market is sucking the air out of the crypto market."

At the same time, Wintermute also pointed to a deeper structural change: retail investors increasingly feel that they have an analytical advantage in the stock market, thanks in large part to the popularity of AI tools-profit analysis and stock selection screening have become more accessible.

However, this "sense of information advantage" is difficult to replicate in the encryption market. Crypto-assets lack a recognized valuation framework, and investable targets continue to expand, making it difficult for individual investors to form the confidence of "informed decision-making." This cognitive gap further accelerated the departure of retail investors.